Jurisdiction - Thailand
News
Thailand – The Cost Of Empowerment.

5 February, 2015

 

Legal News & Analysis – Asia Pacific – Thailand – Corporate/M&A

 

Despite living in exile, former Prime Minister Thaksin Shinawatra’s shadow continues to loom large over Thailand. While Thaksin may be absent from the political scene, the effects of the changes he helped set in motion continue to shape the country. Combined with the looming matter of royal succession, it is safe to say that Thailand is in for more turbulent times.

 

Beaches And Hard Disk Drives

 

Where Thailand’s southern neighbours — Singapore and Malaysia — have enjoyed political stability as a result of uninterrupted rule by a single party or coalition, the exact opposite is true in the Land of Smiles. Over the past eight decades of constitutional monarchy, the country has seen 19 coup attempts — of which 12 were successful — and 17 constitutions.

 

Remarkably, Thailand managed to scrape through these successive political crises without substantial or long-lasting damage to economic growth. Growth from the mid-20th century up until the 1970s was driven by the expansion of the agriculture sector. The collapse of world commodity prices in the early 1980s lent urgency to diversification efforts, and Thailand enjoyed exceptionally high growth rates during the boom decade from 1986 to 1996 as its manufacturing and tourism sectors expanded. The previously agriculture-based economy is now an important part of global supply chains in the car parts and electronics industries and a leading tourist destination. Although industry and services now play a central role in the economy, the agriculture sector remains the largest source of employment (40% of all Thai jobs are in agriculture).

 

“Elected In The Countryside, Deposed In Bangkok”

 

The emergence of Thaksin Shinawatra was a game-changer. Prior to the 2001 elections, no political party had secured even one-third of votes cast. Thaksin’s Thai Rak Thai party was resoundingly successful — by Thai standards — in securing 41% of votes. Thaksin became the first elected prime minister to complete a full term in office as well as the first incumbent prime minister to be re-elected for a second term. Perhaps most importantly, Thaksin engaged the rural electorate who form the majority of the population and brought them into active politics at the national level. By empowering the majority of the population, Thaksin showed them that political control over the country need not be the solely in the hands of the Bangkok-based elite.

 

For all his ability to mobilise support from the masses, a series of missteps led to Thaksin’s downfall carried out through a military coup in September 2006. Thaksin had alienated royalist groups and the political-business elite in Bangkok through his populist policies. His appointment of allies to key government positions and corrupt practices were used to justify the coup by his rivals. Thai Rak Thai was dissolved by the Constitutional Court in 2007 for violation of electoral laws while Thaksin — along with more than 100 former party members — were banned from politics for five years. Thaksin currently remains in self-imposed exile in Dubai.

 

Coup, Junta, Elections, Civilian Government. Repeat.

 

Nine years later, Thailand is in a remarkably similar position to where it was in 2006. The military government which ousted Thaksin has been succeeded by another junta following a 2014 coup — this time to oust the elected Pheu Thai government (a reincarnation of the Thai Rak Thai party) and then-Prime Minister Yingluck Shinawatra, Thaksin’s youngest sister, who has been impeached for corruption. Martial law has been in place since May 2014 and, according to the military government, will remain in place indefinitely.

 

The current junta is in the process of drafting a new constitution and has pushed back elections from a previously promised October 2015 schedule to 2016. Indicators are that the new constitution will include clauses on proportional representation in Parliament and, possibly, a non-elected prime minister. This opens up the prospect of Thai politics returning to an earlier age of messy and unstable coalition governments under an appointed premier.

 

Meanwhile, the performance of the military government under Prime Minister Prayuth Chan-ocha has been decidedly lackluster. The 60-year-old coup leader has populated Parliament with military and police figures while his policyagenda focuses on protecting the monarchy and securityrelated matters, with a nod to eliminating corruption — a questionable commitment when his own brother declared assets more than thirty times his annual salary. New taxes on land and property could undermine support for the military government among the middle classes and the wealthy. Economic growth is expected to slow to 0.8% in 2014, lower than the already low rate of 2.9% in 2013. Under these conditions, the junta’s legitimacy may come into question, leading to further turmoil.

 

People Power Or A Few Good Men

 

One proposal floated by anti-Thaksin and anti-government protest leaders before the 2014 coup was for the formation of a non-elected “people’s council” consisting of “moral and good” people to govern the country, essentially a rehashing of a widely held belief among the Thai elite that “good men” alone should govern the country. The leader of Thailand’s oldest political party, Democrat Party, and former Prime Minister Abhisit Vejjajiva could well be the “good men’s” poster boy. Born in the UK, Abhisit attended Eton — where his contemporaries included David Cameron and Boris Johnson — before reading Politics, Philosophy and Economics at Oxford. His father was a military-appointed minister in the 1990s and currently sits on the board of Thailand’s largest conglomerate.

 

The “good men” view of governance stands in stark contrast to the forces harnessed by Thaksin through his outreach to the non-Bangkok electorate. By tapping into the provinces, Thaksin shifted political power away from the capital. The new participants in the political process come mainly from the country’s populous northern and northeastern provinces where economic growth has outpaced Bangkok for at least the past decade, giving rise to a new middle class. To date, none of the established political parties (i.e. non-Thaksin parties) have sought to engage these voters. Until they do, each successive election will have the same outcome as every election held since 2001 where parties associated with Thaksin win the largest share of votes.

 

A Royal Mess

 

The situation in Thailand is further complicated by the institution of the monarchy. King Bhumibol Adulyajed commands an unparalleled level of respect and adoration in Thailand and is protected by the harshest lèse majesté laws in the world. He has previously intervened to help resolve political crises but, at the age of 87, is hospital-bound and frail. On paper, Thailand is a constitutional monarchy but King Bhumibol is much more than a figurehead. While the Thai Parliament has the power to overturn a veto motion exercised by the King, this right has never been exercised. Observers of Thai politics believe that King Bhumibol exercises extraconstitutional powers through proxies in the Privy Council, military and judiciary. Military interventions in politics have inevitably been legitimised by the King’s endorsement while the anti-Thaksin “yellow shirts” (yellow being the royal colour) have claimed to be acting to protect the monarchy.

 

In recent years, concerns about succession and the longevity of the monarchy emerged as the King’s health has deteriorated. King Bhumibol’s public appearances have grown increasingly rare and a scheduled appearance to mark his 87th birthday in December 2014 was cancelled on medical advice. Designated heir, Crown Prince Vajiralongkorn, will have much to live up to.

 

Vajiralongkorn appears to be preparing himself for the throne by taking a reconciliatory approach towards the military and attempting to shed less desirable ties. In December, Vajiralongkorn effectively divorced his third wife days after her uncle and brothers — all senior officials with the police — were charged with lèse majesté and corruption. The police were one of Thaksin’s power bases and a rival force to the army. Whether this will be sufficient to ensure the army’s support for his succession remains to be seen.

 

Gains From The ASEAN Economic Community In Doubt

 

Thailand’s chronic political instability driving the vicious cycle of coups and constant constitutional revisions pose a real challenge to Thailand’s ability to integrate into the regional economy. There are 106 Thai laws that need to be amended in order to meet requirements for the ASEAN Economic Community (“AEC”). With a pliant Parliament, this would be an easy task were it not for the government’s preoccupation with domestic matters and the politicking.

 

The impact of other developments related to the AEC on Thailand remains to be seen. In the tourism sector, a major source of revenue for the Thai economy, the Mutual Recognition Arrangement on Tourism Professionals may provide additional skilled labour from the region to a sector which is short on manpower but it may also draw away Englishspeaking Thais to seek better-paid positions in countries such as Singapore and Malaysia. Like its neighbours, Thailand will find itself competing for talent and seeking to retain talent, but this is likely to be hampered by the political situation. A lasting political solution to the current impasse will be crucial to the country’s future success, both in relation to the AEC and more generally.

 

(Click to enlarge.)

 

ftithailandchart

 

FTI_Logo_cmyk

 

For further information, please contact:

 

Jason Liew, Director, FTI Consulting
jason.liew@fticonsulting.com

 

Homegrown Corporate/M&A Law Firms in Thailand

 

International Corporate/M&A Law Firms in Thailand

Comments are closed.